On paper, it was a great idea. On paper, it was designed to provide a way for the 30% of American workers who don’t have an employer-sponsored retirement plan to save for retirement.
In reality, after not quite two years of existence, it’s being tossed into the dustbin of history, right along side ‘New Coke,” the Edsel, and other historic product failures.
Launched by the Obama administration with much fanfare in November 2015, the myRA never quite took hold among employees and employers. In fact, the government spent some $70 million and signed up only 20,000 Americans to use the account over the course of 21 months. Read
When launched, myRA provided several ways for people to start saving. Workers could set up automatic direct deposit contributions to the myRA through their employer — through their paycheck; savers could fund a myRA account directly by setting up recurring or one-time contributions from their checking or savings account; or they could, at tax time, direct all or a portion of a federal tax refund to myRA.
The problem, however, despite all the money spent getting people to save via a myRA, was that no one knew about the plan. “A good idea with terrible execution,” tweeted Blair duQuesnay, chief investment officer of ThirtyNorth Investments and Co-Portfolio Manager of the Women Impact Strategy investing with a Gender Lens.
Other advisers shared that point of view. “I never thought it had enough oomph to get off the ground,” said Joe Tomlinson, a certified financial planner. “I’m in the camp with people like Teresa Ghilarducci (a professor at The New School) who see the need for big changes to build a viable retirement system — with more federal government involvement — rather than programs that tinker around the edges.”
At the time, the Treasury Department said the myRA was “designed as a starter retirement account to help bridge the savings gap for many of these workers.” Plus, it was supposed to appeal to “first-time savers, for whom a no-risk, principal-protected investment is more appealing than a higher-risk investment option,” the Treasury said in a release.
Over time, as myRA account holders grew their savings, they had the option to transfer to a private-sector Roth IRA with diverse investment options at any time, or transfer to a private-sector Roth IRA once they reach the maximum myRA balance of $15,000, the Treasury said.
“It never really did take off,” said Jack Towarnicky, the executive director of Plan Sponsor Council of America. “The MyRA was a limited IRA solution, offering a single investment option, and an arbitrary upper limit on asset accumulations. As mentioned in the Treasury press release, ‘Demand for and investment in the myRA program has been extremely low.’”
The federal government launched the myRA in part because Americans tend to save through employer-sponsored or provided retirement plans rather than outside of work even though they can do so using Roth or traditional IRAs.
The retail financial industry, however, never got behind the initiative, partly because it viewed the effort as competition. Plus, the Trump administration isn’t so fond of government-sponsored retirement plans. In fact, Ghilarducci suggested that shutting down the myRA was “yet another way Republicans seem to be siding with the retail financial management industry against people who want a secure and effective way to save.”
Said Ghilarducci: “Winding down myRA really makes no sense. The program wasn’t a panacea to the retirement crisis; but it certainly helped people who used it.”
Towarnicky agrees with that point of view. “MyRA was probably a success for the 20,000 individuals who signed up,” he said. “Many saved monies that they might otherwise have spent. And, hopefully, when MyRA closes down, they will not use the termination of the MyRA program as an excuse to withdraw monies — leakage. However, if success is defined as widespread use, MyRA was never likely to succeed. And, perhaps the only surprise is that we did not terminate the program once we knew of minimal enrollment — instead, investing $70 million and waiting three years.”
So, what should workers who don’t have an employer-sponsored retirement do now? Experts say they should fund a traditional or Roth IRA account directly by setting up recurring or one-time contributions from their checking or savings account into a financial institution.
“MyRA is an ‘access’ or ‘coverage’ solution — structured as a Roth IRA,” said Towarnicky. “However, every American wage earner has had access to a viable retirement savings solution for the last 35-plus years. It is called the Individual Retirement Account or IRA.”
Almost all baby boomers who have consistently contributed the maximum to an IRA since 1982 — the past 35 years — and who continue IRA contributions up to or beyond their Social Security normal retirement age will generally succeed in financial preparation for retirement, said Towarnicky.
“So, there hasn’t been a retirement savings ‘access’ or ‘coverage’ ‘crisis’ since at least 1982,” he said. “Similar to health care, America’s retirement ‘crisis’ is/was not one of ‘access’ or ‘coverage’, but one of prioritization.”
True enough. Unfortunately, people who don’t have a workplace plan weren’t prioritizing, they weren’t saving with the retirement accounts already available. So, government introduced a solution to address that problem. Alas, it was a great idea on paper, but not in reality. RIP myRA. We hardly knew you.